- $700B rescue prompts debate. Lawmakers are poised to fast-track the government's $700B comprehensive rescue plan, but are likely to push for minor changes to its form. Treasury Secretary Henry Paulson publicly pressured Congress for rapid action in hopes relieving financial firms of some of their most toxic assets will stabilize shell-shocked credit markets. The most recent draft includes overseas firms that do business in the States, previously excluded - and now asks for permission to buy car loans, credit-card debt and other devalued assets (but stops short of handwritten IOUs). Sticking points include: the prices and terms at which the government will purchase assets; aid for homeowners (currently not included); and Democratic efforts to require the program's participants to cap what they pay their executives. Sources say Paulson will fight the latter 'hard.' Paulson is scheduled to testify Tuesday and Wednesday, meaning a possible House vote on Thursday and Friday to the Senate.
- I-banks seek tellers. The Fed agreed Sunday night to convert Morgan Stanley (MS) and Goldman Sachs (GS) into traditional banks - forever changing the face of Wall Street - a move it hopes will inoculate the once-revered institutions from market turmoil. National bank regulators will subject the firms to a new level of scrutiny, including harsher capital requirements (read: reduced leverage), which will likely impact their profitability. Futures dipped on the news: investors may take the unexpected move as a sign things at the pair - formerly considered rock solid - were far worse than anyone imagined. "The Fed wanted to send a strong statement that they would not allow Goldman and Morgan Stanley to be 'Lehman-ized,'" a source said. As a regular bank, Morgan will probably try to survive without a merger, and both will likely look to acquire deposit-taking banks with low market-to-book ratios.
- Legg Mason may lose its ticker. Legg Mason (LM) is considering selling itself to one or more private-equity firms, including KKR, insiders say. The buyers would likely spin off most of the asset manager's funds after buying the company. A spokesman called the report "categorically untrue." Legg manages almost $1T in assets. On Friday, it put up $630M to support a faltering money-market fund, sending shares up 9.3% - but they're still down 50% YTD.
- Bank seeks buyer. WaMu (WM) continued to push for a sale of itself over the weekend, under pressure from regulators. Same names (C, JPM, WFC, STD) - same problem: no one wants its mortgage portfolio, expected to bleed $19B over the coming years.
- Loan-shark turnaround. Major AIG (AIG) shareholders plan to meet Monday to discuss alternatives to the government's $85B bailout, sources say. Inexplicably dissatisfied with the 10.5% rate of interest on the massive loan, the group will look for ways to speedily sell off some of AIG's assets - and potentially raise capital in other ways - in order to pay down the debt and return to profitability.
- Nomura buys Lehman Asia. Nomura (NMR) is buying Lehman's Asia operations, a source says. Media reports say Japan's largest brokerage house will pay about $225M. Nomura is also rumored to be in talks to buy some of Lehman's European operations. NMR shares rose 8% in Tokyo. Over the weekend, U.K. PM Gordon Brown said he's pushing the U.S. to help get $8B from Lehman returned to its Britain unit; the amount was transferred to New York just before the bank collapsed.
- Buffett buys Japan toolmaker. IMC International Metalworking, a unit of Warren Buffett's Berkshire Hathaway (BRK.A), will acquire Japanese toolmaker Tungaloy from Nomura (NMR) in a deal valued between $650M-$1B.
- Sanofi ups Zentiva bid. Sanofi-Aventis (SNY) raised its offer for Czech generic drugmaker Zentiva by 9.5%, to $69.71/share - an effort to get Zentiva's board to support the takeover bid. Sanofi fell 1.2% in Paris trading. Sanofi already owns about 25% of Zentiva.
- SanDisk unveils SlotMusic. SanDisk (SNDK), backed by four major music labels (EMI, Sony BMG (SNE), Universal and Warner (WMG)), announced a new physical music format called SlotMusic. Albums will likely be priced at $7-10/album. The effort is a move to boost physical media sales in the face of floundering CD sales; millions of cell phones and MP3 players already have MicroSD slots.
- Asia closes mostly up: Nikkei +1.4% to 12,091. Hang Seng +1.6% to 19,632. Shanghai +7.8% to 2,236. BSE -0.3% to 13,995.
- European markets have erased earlier gains: London -0.3%. Paris -0.2%. Frankfurt -0.3%.
- U.S. futures: Dow -0.61%. S&P -0.6%. Nasdaq -0.33%.
- Crude +2.15% to $106.80. Gold +2.56% to $886.80.
Monday's Economic Calendar
- 8:30 The Chicago Fed National Activity Index
11:30 Fed's Richard Fisher speaks on U.S. economy
Seeking Alpha editor Rachael Granby contributed to this post.
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